Running a small business can be both a rewarding and challenging experience. It can be an opportunity to explore something you’re passionate about while making a difference in your community. But with this comes many challenges that entrepreneurs must navigate, from handling day-to-day cash flow to creating plans for future growth.
How an entrepreneur goes about solving challenges varies, but data from Mercator Advisory Group and Mastercard highlights how, on average, there are differences between male and female owners in their approach to solving some small business challenges.
To better understand the topic, PaymentsJournal sat down with Ginger Siegel, Mastercard’s North America Small Business Lead. During the interview, Siegel helped unpack the data, spoke about the importance of small businesses, and outlined Mastercard’s approach to help them thrive. She also offered actionable advice for aspiring female entrepreneurs.
The importance of small business
Calling it small business is perhaps misleading because, taken together, small businesses make up the backbone of the U.S. economy. “You might say that small business is big business,” said Siegel. She pointed out that there about 30 million small businesses in the United States, employing a total of 58 million people. These small businesses combined end up contributing to over 50% of the nation’s GDP.
Given the massive impact of small businesses, Mastercard is focused on working with its distribution and technology partners to help these businesses grow and thrive, said Siegel.
She explained that part of helping small businesses consists of looking at unique challenges that different owners face, especially for female owners. For example, Siegel pointed out that of the total amount of venture funding going to companies, only 2.2% goes to founders who are women.
As a result, Mastercard is interested in better understanding this segment in order to identify particular needs or different characteristics, so the company can provide effective solutions. The ultimate goal, Siegel said, is to be inclusive of all small business owners.
As such, Mastercard is pursuing a holistic approach to empowering small businesses. “What we really mean by holistic is that MasterCard and the value propositions that we create, go way beyond payments,” said Siegel. “Our focus is on assisting the small business owner in operating his or her business more efficiently, from end to end.”
This means that, in addition to focusing on payments, Mastercard is also concerned with cash flow management, time management, and access to mentorship and expert advice.
Differing viewpoints on growth
Data from Mercator Advisory Group reveal that when asked, “what is your personal outlook to your firm’s revenue in 2019?,” women owners tend to be more optimistic about their company’s growth potential than male owners.
Siegel said findings like that are interesting and that part of explanation can be found in what motivates owners to initially start a business. She said that, on average, female entrepreneurs are more likely to start a business because of a passion for what the company does, in addition to a desire to help the greater good. Another thing that motivates more women than men is the desire to strike a better work-life balance.
“In general, women go into this journey of starting a business with a very positive mindset,” said Siegel. This could explain why they are more likely to be optimistic about growth forecasts. It’s not that men aren’t positive, she said, it’s that they, on average, prioritize earnings in the near term as the primary objective.
The optimistic approach seems to work just fine. Nearly two-thirds of female entrepreneurs say that it took them less than a year to turn their business into a reality, said Siegel.
Issues with cash flow: is there a gender divide?
Access to cash is major concern for small businesses across the board.
“The two things that really keep [a small business owner] up a night is their ability to manage cash flow, and concerns over their overall access to capital,” said Siegel. One alarming statistics is that the average small business owner only has 27 days of cash on hand.
She said that while female owners might be slightly more worried about cash flow issues, it’s likely because they’re typically very plan-oriented.
For example, “68% of women entrepreneurs say that they have a plan that extends beyond five years,” said Siegel. To be able to execute such a plan you need to have cash flow, so ensuring that you keep the cash coming in is crucial.
Technology and small businesses
Technology is another critical area for small businesses, especially when it comes to digital technology. Siegel explained that 80% of small business owners say that their digital enablement and technology enablement is key to their ability to grow.
One major use of technology is for communication. Cellphones are used to stay in touch with employees, customers, and even to purchases supplies. This is especially true for owners that need to travel a lot for work. Siegel said that 32% of business owners travel internationally for business, making cellphones an indispensable part of their professional lives.
In general, entrepreneurs want to use technology that will save them time and make the business run more efficiently, said Siegel. Knowing this, Mastercard seeks to provide small business owners with the tools they need.
One salient challenge for small business owners is managing expenses while on the road. Keeping track of paper receipts can be a challenge—they’re annoying to collect and harder to keep organized. In response, Mastercard partnered with a company called Itemize to develop Mastercard Receipt Management, an app free to cardholders. It allows people to take pictures of receipts in order to create a digital copy, categorize the expense, and then upload the information to accounting software.
Mastercard also partners with other companies to provide other useful software at a discounted price. For example, Mastercard small business cardholders can use Quickbooks, TurboTax, and Office 365 at cheaper rates. This makes it easier for small businesses to access the tools they need to be successful.
Seeking help when needed
Since running a business is a complex affair, many owners need to rely on other people for help. Most small businesses don’t have a chief marketing officer or chief technology officer, said Siegel. This means that owners often rely on friends, family, and financial advisors such as their accountants and bankers for advice and help when needed.
“When we look at the differences in gender, women specifically are seeking financial partners that actually cultivate and specialize in women,” said Siegel. “We also find that women tend to over index a bit over men in actually leaning on financial advisors and institutions, as well as other small business owners.”
Although there are organizations focused on helping female business owners, such as NAWBO, “74% of women business owners wish that there was more information readily available about the financial side of running a business,” said Siegel. “So I think there’s a tremendous opportunity for not only Mastercard, in the work that we do to provide mentorship and networking, but also for the industry as a whole to focus on this important segment.”
For its part, Mastercard has partnered with Create & Cultivate, a group that focuses on female entrepreneur empowerment. Create & Cultivate hosts events to provide entrepreneurs with opportunities to talk with very successful business owners.
“Through our partnership with Create & Cultivate, we have developed the MasterCard Advisory Council,” said Siegel. “This is a group of very successful women that work together with us to build solutions and help small business entrepreneurs who are female thrive.”
Siegel concluded the interview by offering advice to aspiring female entrepreneurs. She implored young girls to grab on to their dreams, but understand why. She said they should really figure out what they’re passionate about and figure out if others are, too. It’s important to reach out to people doing what you’re interested in to learn more about their focus industry — not just about the benefits, but also the pitfalls. Then you can plan accordingly and develop successful strategies before getting into it, she said.
She offered all this advice because, as she put it: “We need all the women entrepreneurs we can get.”